COLORADO SPRINGS, Colo. (4/28/08)--Indirect lending is a key source of credit union membership growth, but it is difficult to deepen relationships with indirect borrowers, attendees at the Credit Union Association of Colorado (CUAC)'s 74th Annual Meeting were told last week. Relationships with indirect borrowers are fragile and their profitability is questionable, said Heather Thiltgen, vice president, consumer segment programs at CUNA Mutual Group. Thiltgen stressed the importance of deepening relationships with indirect borrowers in a session on "Building Members from Indirect Borrowers, Lessons Learned." She profiled two credit unions that are successful in attracting members via indirect lending: Altra FCU in LaCrosse, Wis., and BCU in Vernon Hills, Ill. Atlra focuses on the dealer and underscores its dealer relationship to drive the business, she said. This method generated 90% of business from local dealers. Alta also sells its finance managers on the membership, and the dealer account representative is an indirect buyer. Thiltgen noted Altra works with dealers and does not deny loans based on score alone. It also practices cross-selling strategies. Dealer account reps review credit reports, cross-selling through the finance manager. The credit union follows up with a welcome letter two weeks later, then a newsletter within the month, she said. As a result, indirect borrowers took out 49% additional products from Altra, or 1.72 services per member--excluding the basic share account or indirect loan. At BCU, the focus was on outbound sales and attention to personal contact. BCU uses the consultative sales approach by emphasizing benefits, asking open-ended questions, and being sensitive to time and circumstances, Thiltgen said. The credit union has aggressive incentives and tracks results, which were an 82% contact rate for January. Also, 40% of members contacted accepted additional products and services. The average amount of loan or credit card balances per attempt was $1,761, she said. CUNA Mutual Group's Indirect Borrowers Pilot was designed using best practices to help credit unions deep relationships with new indirect borrowers, increase credit union loan balances and non-interest income, and make ongoing marketing efforts more effective, she said. The pilot indicates that members are receptive to outbound calls and the welcome/service approach has relationship-building benefits. Thiltgen advised that a credit union should:
* Dedicate resources to making its program successful; * Verify compliance with regulations surrounding use of credit data; * Obtain technology/systems support needed; * Track the results; * Keep in mind that auto loans are seasonal and consider other outbound opportunities such as new member onboarding programs; and * Price for relationship.
More than 500 credit union people, representing 62 credit unions, attended CUAC's convention, which was held in Colorado Springs Thursday and Friday.